Proving our worth: return on investment

We hope you’ve been enjoying this discussion topic about how we articulate and prove the worth of our libraries. Today we’re going to look at a method from across the business world.

One way to articulate the value of your library is to use a return on investment model. This model has become quite popular in recent years, particularly as funding becomes stretched.

Coins. Licensed under CC0 from Pixabay

Coins. Licensed under CC0 from Pixabay

Return on investment (or ROI) has been used in business and financial areas for a long time. Simply put, it’s the difference between what you invested in something and what you got out of it. So if you buy a painting for $100, and sell it for $200, you got a 200% return on your investment. You could also say that for every $1 you spent, you received $2.

How can we use this for libraries? It’s a three step process:

  1. Determine what the library generated – economic activity, improved patient outcomes, higher employment, reduced youth crime
  2. Figure out what the cost of that thing is. If the average cost of investigating and prosecuting youth crime in your community is $50,000, and you can demonstrate that the library reduced that crime by 10%, you could claim that the economic benefit is $5000 (that is, 10% of $50,000)
  3. Figure out what it cost to do that. If crime reduced following a youth program at the library that cost $1000 to run, then your library spent $1000 to get an economic benefit of $5000 for the community – a return of $5 for every $1 invested.

There are some scenarios where using an ROI measure is very effective – this may include where a particular activity resulted in a measurable outcome, or where funders are making decisions based on similar metrics from competing services (your library may be competing for funding with the student centre, or the marketing department). ROI figures can make for great headlines, such as the statement that “For every £1 of public funding the British Library receives annually, £4.40 is generated for the UK economy”, or “Health library study indicates $9 return for every $1 invested”. Using an ROI measure is a way of using business and economic language with funders, rather than relying on ‘library speak’.

However ROI measures should be used with caution, and only where appropriate. While they may generate big headlines, libraries need to ensure that the figures are accurate and reliable – invariably someone will ask how they were calculated. Many of the benefits that libraries bring are indirect and general (for example, we all benefit from having a better educated populace), which makes them difficult to measure.

Another danger of using ROI measures is that they can over-simplify the contribution of a library, and can be used as a comparison metric in ways you may not anticipate. If your branch library reports an ROI of 500%, and another branch library has an ROI of 250%, are they performing half as well as your library? A funder may ask whether they should invest more in the lower or higher performing library. Finally, ROI studies may give unwelcome answers. This may be due to the difficulties in converting library impact in financial figures, or it may be an indicator of actual poor performance.

ROI measures can be very effective when used wisely and appropriately. Can you think of any examples where an ROI study might be useful in your workplace?

We invite you to share your thoughts and examples on using ROI measures in libraries: you can do so via our Twitter or Facebook pages, or in the comments section below.

Further reading:

Posted in Discussion topics, Round 2015A and tagged , , , , , , .

2 Comments

  1. Pingback: Advocacy and lobbying: demonstrating value | International Librarians Network

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